7 Stocks Set to Soar in a Year-End Santa Claus Rally

Stocks to buy

We’re nearing the year-end holidays, which is typically a positive time for the stock market and investors. Known as the “Santa Claus rally,” the stock market tends to rise steadily during the fourth quarter of the year, with share prices peaking in late December. According to data compiled by LPL Financial, a Santa Claus rally has occurred 79% of the time since 1950. Many investors look forward to a year-end rally that boosts their portfolios, and professional traders often rely on it to help determine their year-end bonus at work. A Santa Claus rally would be especially welcome this year as stocks have been in a funk since August and continue to trend lower as we approach Halloween.

Of course, year-end holiday shopping often provides a sales boost to retailers and other companies, which can also help to lift stock prices. In this area, things look promising. Deloitte’s annual Holiday Retail Survey forecasts that consumer spending will surpass pre-pandemic levels for the first time this year, with the average consumer spending $1,652 on gifts, a 14% increase from 2022 levels. With Thanksgiving and Christmas on the horizon, we look at seven stocks set to soar in a year-end Santa Claus rally.

Amazon (AMZN)

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E-commerce giant Amazon (NASDAQ:AMZN) is already in full holiday mode. The company held its latest Prime Day sales event on Oct. 10 and 11, and has announced plans to hire 250,000 additional workers across its global operations as it prepares for the busy year-end shopping season. The new hires include full-time, part-time, and temporary seasonal workers. The company is hiring 100,000 more workers than in the final quarter of 2022 as it prepares for a busy year-end sales period.

Amazon’s biannual Prime Day events help to boost the company’s revenue. The last event held in July generated more than $12 billion in sales, making it the most successful Prime Day ever for Amazon. The company has been moving its second Prime Day sales event earlier in the fourth quarter each year as it extends the holiday buying season. Amazon also gets a big lift from the Black Friday and Cyber Monday sales events held at the end of November and tied to Thanksgiving. AMZN stock is up 45% year-to-date (YTD).

Walmart (WMT)

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Discount retailer Walmart (NYSE:WMT) is another company that pulls out all the stops for the year-end holidays, hiring additional staff and staying open 24-hours a day between Thanksgiving and Christmas so consumers can purchase last minute items. Walmart, too, benefits greatly from the Black Friday and Cyber Monday sales events, as well as Boxing Day specials. With deals on everything from electronics to toys to clothes, Walmart’s in-store and online sales get a big increase from holiday shopping and a Santa Claus rally in the market.

Walmart most recently reported second-quarter financial results that beat Wall Street forecasts and raised its forward guidance. Driven by strong grocery sales and online spending, Walmart reported Q2 EPS of $1.84 versus $1.71 that was expected. Revenue amounted to $161.63 billion compared to previous analyst estimates of $160.27 billion. The big box retailer said its e-commerce sales during Q2 rose 24% from a year earlier. Same-store sales increased 6.4%. The company now expects full year sales to increase 4% to 4.50%.

WMT stock has gained 11% so far in 2023.

Meta Platforms (META)

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Tech giant Meta Platforms (NASDAQ:META) is banking on a big year-end sales push and its stock could benefit greatly should investor sentiment improve and there’s a strong year-end Santa Claus rally in the market. The company recently introduced a series of new consumer electronics with the goal of capitalizing on holiday consumer spending. Chief among these items is the newly released Quest 3 virtual reality headset, which costs $499 to purchase, and is focused on video games.

The new Quest 3 headset supports games from Microsoft’s (NASDAQ:MSFT) Xbox video game unit and is positioned to attract gamers. Meta’s new VR headset has been released months ahead of the launch of Apple’s (NASDAQ:AAPL) Vision Pro augmented reality headset that is scheduled to be available to consumers in early 2024. Meta has also introduced a new version of its Ray-Ban mixed reality smart glasses that can capture photographs and videos with a voice command and is expected to sell briskly.

META stock is already up 147% this year amid a big rally in mega-cap tech stocks. Further gains could come with a Santa Claus rally.

Apple (AAPL)

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If there’s another tech company that benefits from year-end holiday shopping and whose share price could get a lift from a Santa Claus rally, it is Apple. Each September, the company unveils its latest consumer electronics products ahead of the holiday shopping boom, where it sees increased sales for items ranging from its iPhone to its MacBook computer. This September, Apple introduced new smart watches, iPads, AirPods and, of course, the iPhone 15 that has a new charging port and stronger Titanium case, among other features.

Apple’s year-end sales boost is likely to extend into early 2024 as the company makes its highly anticipated Vision Pro mixed reality headset available to consumers. Introduced in June of this year, the Vision Pro headset is the first wholly new product from Apple in a decade, and it is expected to be a bestseller. AAPL stock could use any boost it gets from a Santa Claus rally. Due to ongoing issues in China, the company’s share price has slumped 3% over the past month, though it remains up 37% on the year.

Costco Wholesale (COST)

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Costco Wholesale (NASDAQ:COST) and its stock always do well during the holidays. The company’s grocery sales get a boost from holiday shopping, as do its online sales of electronics and other items. Like the other retailers on this list, Costco offers deals and discounts during Black Friday, Cyber Monday, and Boxing Day that attract consumer dollars. At the same time, COST stock also tends to get a boost whenever investor sentiment towards the retail sector improves, as it often does during a Santa Claus rally.

This year, the holidays arrive as Costco undergoes a leadership change for the first time in decades. The company just announced that Craig Jelinek, the long-time CEO of Costco, is retiring at the start of 2024. Jelinek, age 71, will be succeeded in the top job by current Chief Operating Officer (COO) Ron Vachris, a company veteran, as part of what the company says is a longstanding and orderly succession plan. Vachris, age 58, will become only the third CEO in Costco’s 40-year history. He assumes the CEO role on Jan. 1. COST stock is up 21% YTD.

American Express (AXP)

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Consumers tend to put a lot of their holiday purchases on credit cards, which is good news for American Express (NYSE:AXP). The credit card company tends to shine amid the frenzy of year-end shopping that takes place. In September of this year, American Express issued a report to its merchants called “7 Strategies to Capitalize on Traffic This Holiday Season.” The company also touts its various credit card rewards with consumers in the run up to the Christmas shopping period.

The company just issued third-quarter financial results that showed continued strength when it comes to consumers using its credit cards for purchases. American Express announced its sixth consecutive quarter of record revenue, as well as a Q3 profit of $2.45 billion, or $3.30 per share. The profit figure was well ahead of the $2.96 a share in earnings that Wall Street analysts had forecast. The company said that its results got a lift from continued spending on the part of wealthy clients. Here’s hoping that continues through Christmas.

Target (TGT)

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Discount retailer Target (NYSE:TGT) also tends to shine during the holidays as it too draws in consumers with year-end deals. The company and its stock could certainly use some positive news. Target most recently announced that it’s closing nine stores in major U.S. cities due to rising incidence of violence and organized retail theft. Target, which has nearly 2,000 stores in the U.S., is outspoken about organized retail crime and its financial impacts.

When the company reported its Q2 earnings earlier this year, executives said theft is expected to reduce its full-year profitability by more than $500 million. The big-box retailer that competes directly against Walmart cut both its full-year sales and profit forecasts, saying consumers are refusing to spend on discretionary items at its stores. Unlike Walmart, Target is not a big player in the grocery space. Hopefully, the company and its stocks will get a lift from a year-end Santa Claus rally. TGT stock is down nearly 30% so far in 2023.

On the date of publication, Joel Baglole held long positions in AAPL and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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